You have just been hired as a financial analyst for Basel Industries. Unfortunat

Question

You have just been hired as a financial analyst for Basel Industries. Unfortunately, company headquarters (where all of the firm's records are kept) has been destroyed by fire. So, your first job will be to recreate the firm's cash flow statement for the year just ended. The firm had $100,000 in the bank at the end of the prior year and its working capital accounts except cash remained constant during the year. It earned $5 million in net income during the year but paid $700,000 in dividends to common shareholders. Throughout the year, the firm purchased $5.5 million of machinery that was needed for a new project. You have just spoken to the firm's accountants and annual depreciation expense for the year is $460,000; however, the purchase price for the machinery represents additions to property, plant, and equipment before depreciation. Finally, you have determined that the only financing done by the firm was to issue long-term debt of $1 million at a 6% interest rate. What was the firm's end-of-year cash balance? Recreate the firm's cash flow statement to arrive at your answer. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar, if necessary.

$ ______

Explanation / Answer

                                                                Basel Industries

                                                            Cash Flow Statement

                                                          For the Year Ended XXXX

Particulars

Amount

Amount

Cash Flows from Operating Activities:

Net income

5,000,000

+ Depreciation Expense

460,000

Net Cash Flow from Operating Activities

5,460,000

Cash Flows from Investing Activities:

Purchase of machinery

-5,500,000

Net Cash Flow from Investing Activities

-5,500,000

Cash Flows from Financing Activities:

Payment of Dividends

-700,000

Issue of bonds

1,000,000

Net Cash Flow from Financing Activities

300,000

Net Change in Cash

260,000

Beginning Cash Balance

100,000

Ending Cash Balance

360,000

                                                                Basel Industries

                                                            Cash Flow Statement

                                                          For the Year Ended XXXX

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.